Swiss economic outlook slightly more pessimistic
Published: Wednesday, Nov 27th 2024, 12:20
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According to financial analysts and economists, the outlook for the Swiss economy has deteriorated somewhat. In addition, increased inflationary pressure is expected following the election of Donald Trump as the new US president.
The UBS CFA indicator, which summarizes the expectations of financial analysts and economists regarding Swiss economic development over the next six months, deteriorated by 4.7 points to -12.4 points in November compared to the previous month, as the major bank announced on Wednesday. The index is now in negative territory for the sixth month in a row.
However, the situation is not considered to be overly dramatic. Although the indicator has fallen to its lowest level since January 2024, less than a third of respondents actually expect economic conditions to deteriorate, according to UBS. By contrast, 50 percent expect no change.
In addition, the assessment of the economic situation in Germany has improved. Almost 90% of respondents currently rate the current situation as "normal". Internationally, the situation is somewhat different: a good 40% of respondents rate the situation in the USA as "good", while almost two thirds rate the situation in the eurozone as "bad".
Rising inflation expectations
With the imminent change of government in the USA, however, survey participants are reassessing their inflation expectations in particular and have raised them significantly for all regions for the next six months. While in October the majority still expected a slowdown in inflation in Switzerland and the eurozone, expectations in November are much more mixed. The proportion of analysts expecting a fall in the inflation rate has fallen by around 25 percentage points in each case.
The picture in the USA has changed even more clearly: after almost 60% of participants who had expected inflation to cool further in October, more than half now anticipate an acceleration. Against this backdrop, long-term interest rates in Switzerland, the eurozone and the USA are no longer expected to fall, according to UBS. In contrast, the experts continue to expect a further decline in short-term interest rates in all three regions.
However, there was no clear consensus in the survey regarding the impact of the US election on the USD/CHF currency pair in the near future. However, a fairly large proportion of analysts expect the US dollar to depreciate against the franc in the long term.
Further SNB interest rate cut
With regard to Switzerland's monetary policy, analysts expect the Swiss National Bank (SNB) to cut interest rates again at its upcoming meeting on December 12. The most likely scenario is therefore a reduction in the key interest rate from the current 1.00% to 0.75%. The analysts gave such a development a probability of 56 percent. A stable key interest rate and a cut of 50 basis points were given a probability of 26% and 13% respectively.
Looking ahead to next year, survey participants also predicted a 46% probability that the SNB key interest rate will fall to 0.5% by the third quarter of 2025. Meanwhile, they gave the scenario of the key interest rate not falling below 0.75% a cumulative probability of 34%. Negative interest rates are still hardly an issue.
The survey took place between November 14 and 20. Thirty-two people from the Swiss financial sector took part.
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